How Executive Level Accountants Can Avoid Fraud

How Executive Level Accountants Avoid Fraud

Every professional is held to a documented standard of ethics, whether they are medical doctors, law enforcement officials or certified public accountants (CPAs). No matter your occupation, you have a responsibility to yourself, your clients and the profession to maintain those ethical standards. This is especially true for CPAs, who are held to some of the highest standards of ethics through their state board of accountancy, which also regulates their licensing and continuing professional education.

A CPA carries the responsibility of upholding those high standards of ethics and professionalism. As one of the most trusted professionals in the world, CPAs are held accountable to further the integrity of themselves and the profession. If they fail to abide by the profession’s lofty ethical standards, CPAs risk fines or even losing their license to practice.

This is why when a CPA is presented with an ethical dilemma, it is extremely important that they take into consideration all they have been taught and weigh all possible decisions. If they make the wrong choice, it could mean the loss of their license to practice, and therefore their livelihood. CPAs must ensure that they present the best possible guidance when requested. This is not always the easiest task, as it may often be in direct conflict with what their employer or client is asking them for.

CPAs, however, are not required to provide a specific solution for dilemmas they may encounter. Instead, they only need to provide appropriate guidance to lead the decision-makers to the correct and ethical decision. Let’s take a look at a specific predicament and see how a CPA can effectively handle the issue without violating their ethical obligations.

A set of executive level managers instruct their CPA to record a transaction in a fraudulent manner that would reflect higher revenue generation for the company. Though they do not use the phrase “fraudulent” in their request, it is implied. Ultimately, the executives want to be able to earn their bonus and won’t be able to unless this fraudulent recording is made.

Obviously, the way the executives want the earnings recorded would be fraudulent.  If the CPA did not object to the request, it would be considered a violation of ethics. However, a CPA may decide to list the revenue generated during the last quarter, as a result of a contract that brings in bonus worthy revenue but that has not yet all been collected due to the scheduled income collection/debiting dates that go through January of the following year. This way the executives have contracted enough revenue generation with outside sources to earn their bonuses, they simply have not collected it yet as a result of the schedule for collection of revenues.

The company’s executives are ultimately required to make the final decision, but they need the expert advice of a CPA to make the right decision. It is the CPA’s license and reputation that is on the line and failing to uphold proper ethical standards could quickly result in a fine or loss of license to practice. CPAs, whether in a large multinational corporation or running their own firm, are required to maintain the highest standard of ethics and professional conduct. Taking a risk to please an executive or client is just not worth the potential repercussions.

Our goal is to provide future CPAs with the information needed in order to help you avoid fraud during your accounting career. Avoiding fraud is a top priority for CPAs as this is part of the licensure code of ethics.

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